How is payment practice evolving after the Corona crisis?

There is no question that the Corona pandemic is having an impact on the payment behavior of Austrians, both in the B2C and B2B segments. Both the payment behavior of private debtors and that of commercial debtors has been suffering since the beginning of the Corona crisis.

In the medium term, many consumers lack the income to pay all their bills reliably and on time. As a result, more and more creditors are faced with defaulting debtors.

Causes of declining payment practice among consumers

Analyzing various published surveys and statements from the past year, we find that the peak of the negative impact of the Corona pandemic in terms of late payments by consumers is probably still ahead of us.  Short-time work and unemployment are the most frequently cited reasons for liquidity shortages. Short-time work on this scale is therefore a completely new cause of late payment, which until the first quarter of 2020 had not played any role at all in consumers’ payment behavior.

So far, hardly any effect has been seen in consumer insolvencies. However, this is likely to be the so-called “calm before the storm”. After all, high unemployment figures and a massive number of people on short-time work are reducing the financial scope of many consumers. If the crisis on the labor market cannot be overcome, it must be expected that the number of consumer insolvencies will also rise again sooner or later.

Other causes of poor payment behavior are:

  • Liquidity bottleneck due to the Corona crisis
  • Unemployment
  • Deliberate non-payment
  • Overindebtedness/personal insolvency
  • Unforeseen life events such as illness or death of a partnerNegligence (forgetfulness)
  • Complaints from the customer

Causes of declining payment morale among companies

But it is not only in the B2C segment that payment morale is on the decline, but also in the B2B sector. Here, too, the Corona pandemic is leading to liquidity bottlenecks in the medium term. It should be noted that government Corona aid had a valuable influence on the economic development in the first year of the pandemic and that the extent of the damage would have been disproportionately higher without aid.

Other causes of poor payment behavior by companies include:

  • Payment defaults by their own customer
  • Poor order situation
  • Too little equity capital
  • Exploitation of supplier credit
  • Insolvency
  • Deliberate non-payment
  • Negligence (forgetfulness)
  • Complaint of the customer

In particular, companies that had already failed to organize their receivables management professionally in times of economic boom have indirectly encouraged their debtors to extend payment terms and now find themselves exposed to increased risks.

Which industries are particularly affected by poor payment practices as a result of Corona?

The effects of the Corona pandemic run through almost all industries, with a few exceptions. It is those industries whose operations were particularly constrained by the Corona lockdown that are suffering the most from payment defaults and are therefore doubly affected.

What is the outlook?

In short, optimism is called for!

Of course, a pandemic of this magnitude cannot pass us by without leaving a trace. The long-term consequences will be with us for years to come.

The economic slowdown in Austria and the world as a whole will naturally also be reflected in the insolvency figures.

As soon as various government support measures to combat the pandemic are reduced or expire, a considerable increase in insolvencies must be expected if the economy does not recover quickly from the economic slump triggered by the Corona pandemic.

This makes it all the more important to know one’s customers well and to be able to assess the risk as accurately as possible.

However, if payment is delayed, help is needed quickly. Don’t get bogged down with agreements that are ultimately not honored. Even in times of a pandemic – time is money! A tight dunning process with the necessary tact, even for long-standing customers, is essential! Eurincasso GmbH will gladly support you in the collection of overdue receivables.

Even the worst pandemic comes to an end one day. And then the contact to long-time customers and partners should still be practicable on eye level. The economy can only really take off if existing cooperations continue to treat each other with respect in difficult times.

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Collection service providers supply all our industries with liquidity, prevent payment defaults and thus secure jobs and entrepreneurial livelihoods. This makes them an important pillar for the Austrian economy
Roland Zuckerstätter
Managing Director Eurincasso GmbH